CORPORATE SOCIAL RESPONSIBILITY

:
A THREE-DOMAIN APPROACH

Mark S. Schwartz and Archie B. Carroll

Abstract: Extrapolating from Carroll's four domains of corporate socia!
responsibility (1979) and Pyramid of CSR II99I), an alternative approach to conceptualizing corporate social responsibility (CSR) is
proposed. A three-domain approach is presented in which the three
core domains of economic, legal, and ethical responsibilities are depicted in a Venn model framework. The Venn framework yields seven
CSR categories resulting from the overlap of the three core domains.
Corporate examples are suggested and classified according to the
new model, followed by a discussion of limitations and teaching and
research implications.

F

or the past several decades, the debate over the proper relationship between
business and society has focused on the topic of corporate social responsibility (CSR) (Klonoski 1991). In the modern era, the stage was set for this debate
by Keith Davis, who posed two intriguing questions in the 1960s: "What does
the businessperson owe society?" (Davis 1967) and "Can business afford to
ignore its social responsibilities?" (Davis 1960). Although many have attempted
to define CSR over the years, the concept has remained vague and ambiguous to
some (Makower 1994: 12). Definitions of CSR fall into two general schools of
thought, those that argue that business is obligated only to maximize profits
within the boundaries of the law and minimal ethical constraints (Friedman 1970;
Levitt 1958), and those that have suggested a broader range of obligations toward society (Andrews 1973; Carroll 1979; Davis and Blomstrom 1975; Epstein
1987; McGuire 1963).
An important attempt to bridge the gap between economics and other expectations was offered by Archie Carroll (1979). His efforts culminated in the
following proposed definition of corporate social responsibility:
'
The social responsibility of business encompasses the economic, legal, ethical, atid discretionary expectations that society has of organizations at a
given point in time. (1979: 500, emphasis added)
As a helpful way of graphically depicting the components of his CSR definition and expounding upon them, he later incorporated his four-part categorization
into a "Pyramid of Corporate Social Responsibility" (1991; 1993). Carroll's
Pyramid of CSR is presented in Figure 1.
© 2003. Business Ethics Quarterly, Volume 13, Issue 4. ISSN 1052-150X.

pp. 503-530

504

BUSINESS ETHICS QUARTERLY
Figure 1
Carroll's (1991) Pyramid of Corporate Social Responsibility

Be a good
corporate citizen
Be ethical

Obey the taw

Be profitable /

/

/

/

Philan- \

Ethical

Legal

Economic

Desired

\

Expected

\

Required

\

Required

Source: A. B. Carroll, "The Pyramid of Corporate Social Responsibility: Toward the Moral
Management of Organizational Stakeholders," Business Horizons (July-August
1991): 39-48.

Carroll's four categories or domains of CSR have been utilized by numerous
theorists (Wartick and Cochran 1985; Wood 1991; Swanson 1995, 1999) and
empirical researchers (Aupperle 1984; Aupperle, Carroll, and Hatfield 1985; Burton and Hegarty 1999; Clarkson 1995; Ibrahim and Angelidis 1993, 1994. 1995;
Mallott 1993;O'Neill,Saunders, and McCarthy 1989; Pinkston and Carroll 1996;
Smith. Wokutch, Harrington, and Dennis 2001; Spencer and Butler 1987; Strong
and Meyer 1992). Several business and society and business ethics texts have
incorporated Carroll's CSR domains (Boatright 1993; Buchholz 1995; Weiss 1994)
or have depicted the CSR Pyramid (Carroll and Buchholtz 2000. 2003; Jackson,
Miller, and Miller 1997; Sexty 1995; Trevino and Nelson 1995). According to
Wood and Jones (1996: 45). Carroll's four domains have "enjoyed wide popularity among SIM (Social Issues in Management) scholars." Such use suggests that
Carroll's CSR domains and pyramid framework remain a leading paradigm of
CSR in the social issues in management field. Due to the acceptance and impact
of Carroll's CSR contributions, it may be appropriate to re-examine his model to
determine whether it can be modified or improved or if there is a possible alternative approach to conceptualizing corporate social responsibility.
In a quest to propose an alternative approach to CSR that strives to augment
and amend the Carroll model, the following paper will consist of four parts: (1)
a brief discussion of some issues or limitations of Carroll's model; (2) a presentation of the new alternative model, the "Three-Domain Model of CSR"; (3) a
discussion of the limitations of the new model; and (4) future teaching and research implications of the new model.

CORPORATE SOCIAL RESPONSIBILITY 505 Issues with Carroll's Model ' Three issues with respect to the Carroll model are identified and discussed as they are items upon which the proposed three-domain model proposes changes.. Reidenbach and Robin (1991: 274) use a pyramid to depict their conceptual model of corporate moral development. (2) the role of philanthropy as a separate component in the model. to some. philanthropic responsibilities. the pyramid framework could lead one to misunderstand the priorities of the four CSR domains. the "ethical" corporation). while the base of the pyramid portrays the lowest or least advanced stage (i. the "amoral" corporation). The three issues include: (1) the use of a pyramid to depict the relationships among the four components of the model. However. For example. Others agree that philanthropy cannot be considered a responsibility in itself (L'Etang 1994. This is clearly not the perspective of the pyramid's rankings of CSR priorities that Carroll intended. since he stipulates that the economic and legal domains are the most fundamental while philanthropic responsibilities are considered less important than the other three domains (1991: 42). Use of a Separate Philanthropic Category i In addition to the possible misunderstandings inherent in using a pyramid. Stone 1975). and ethical domains. and (3) the incomplete theoretical development of the economic. the tension between the economic and ethical and the economic and philanthropic domains (Carroll 1993: 34). his use of a pyramid framework to depict his CSR domains may be confusing or inappropriate for some applications. One may be led to conclude that the domain at the top of the pyramid. Such mutuality is an integral characteristic of CSR (Clarkson 1991: 349) and of such fundamental importance that it must be included and clearly depicted in any proposed CSR model. the pyramid framework suggests a hierarchy of CSR domains. philanthropy is not considered a duty or social .. that should be strived for by all corporations.e. while the economic domain at the base of the pyramid is the least valued CSR domain. In this respect. Carroll acknowledges that it may in fact be "inaccurate" (1979: 500) or a "misnomer" (1993: 33) to call such activities "responsibilities" due to their voluntary or discretionary nature. Carroll's use of dotted lines separating the domains does not fully capture the non-mutually exclusive nature of the domains. I Use of a Pyramid Framework Although there is considerable value in Carroll's four-part model. is the most important or highly valued domain. and suggest that the top of the pyramid represents the highest or most advanced stage of moral development (i.e. nor does it denote two of the critical tension points among them. Carroll's use of a "philanthropic/discretionary" category can be confusing and may be seen as unnecessary to some. Second. a pyramid framework cannot fully capture the overlapping nature of the CSR domains. a disadvantage recognized by Carroll (1993: 34). First. legal.

could arguably fall under the ethical domain. legal. it could be argued that philanthropic activities are simply an example of an ethically motivated activity. The central reasons for this placement are that. In this vein.g. is a corporation's contribution to a charitable organization an ethical activity (i. first. and second. the paramount example of a philanthropic activity.g. Shaw and Post (1993: 746) argue that rule utilitarianism supports corporate philanthropy as a means of complying with a "rule" which maximizes the public welfare.e. if it were believed to exist. philanthropic activities might simply be based on economic interests. including all of the examples Carroll (1993: 33) refers to (e. and ethical components of corporate social . providing a day-care center for working mothers. would better be subsumed under ethical and/or economic responsibilities. the ethical principle of utilitarianism can be used to justify many philanthropic activities. For example.e. a supererogatory act based on what Kantians might refer to as an "imperfect" duty).. conducting in-house programs for drug abusers). expected by society) or a philanthropic activity (i.e.506 BUSINESS ETHICS QUARTERLY responsibility of business (i. giving to charitable organizations. emphasis added). but something that is merely desirable or beyond what duty requires (e. is it not possible that they are treating their employees as ends in themselves and not merely as a means ? When Carroll says that the essence of these philanthropic activities is that they are "not generally expected of business in an ethical sense" (1993: 33.. merely desired by society)? Evidence currently indicates that the majority of companies donate to charitable organizations (Carroll 1993: 387). raises concerns over the ability to define and measure discretionary activities in the actual corporate world." Strong and Meyer conclude in their study that while there was strong support for the existence of the economic. rather than needing to be separated into a philanthropic domain as currently defined.. Clarkson (1995: 95). there is still an issue as to whether such a distinction could be applied by empirical researchers in the field. with a majority of the population expecting that companies make charitable donations (Sexty 1995: 274). Carroll. Aupperle. Do these findings not suggest that society now expects corporate philanthropic contributions? According to Carroll's definitions.. for example. The new model proposes that such a category. One formulation of Kant's categorical imperative is that one should treat people as an end in themselves and not merely as a means to an end.. it is sometimes difficult to distinguish between "philanthropic" and "ethical" activities on both a theoretical and practical level. Even if one is able to make a theoretical distinction between ethical and philanthropic activities. giving to charity. adopting a school. At the theoretical level. For example. and Hatfield (1985: 455) state that Carroll's philanthropic domain is "difficult to ascertain and evaluate. an expected act based on what Kantians might refer to as a "perfect" duty). If a company provides a day-care center for working mothers or conducts in-house programs for drug abusers. this raises the question of exactly when an activity can be considered ethical as opposed to philanthropic according to Carroll's treatment of these two domains.

The economic. They state: "The results for discretionary (philanthropic) responsibility do not support the survey's use as a general measure of managerial perception of responsibility of this component of social responsibility" (1992: 92. Whether to increase sales. Incomplete Development of Economic. Economic domain. Legal domain. Legal. maintaining a strong competitive position and high level of operating efficiency. The legal responsibility is depicted as reflecting a view of "codified ethics" in the sense that law embodies basic notions of fairness as established by our lawmakers. emphasis added). legal. or to improve employee morale. as opposed to a distinct philanthropic obligation. help improve public image. The new model will clarify the economic domain below. corporate philanthropy might also be based primarily on economic motives (Shaw and Post 1993: 748). especially the legal and ethical domains. For example. Carroll provides little discussion of how corporations may engage in multiple domains other than by suggesting that a toy manufacturer making safe toys would be complying simultaneously with its economic. In addition to ethical reasons. and ethical responsibilities (1979: 501). A broader appreciation of the legal system and its influence on corporate activities indicates a much wider range of legally-based activities that ought to be discussed. and Ethical Domains Another issue with Carroll's model is the incomplete discussion and inclusion of criteria for assessing corporate activities or motives as falling into each of the domains. It is stressed that it is business's responsibility to comply with these laws. legality may be broken down into three general categories: (i) compliance.CORPORATE SOCIAL RESPONSIBILITY 507 responsibility. based on their economic responsibility. Carroll defines the economic domain of CSR as follows (1991: 40-42): "Perform in a manner consistent with maximizing earnings per share. legal. When corporations engage in philanthropy for these reasons. 500. being as profitable as possible. they are simply acting out of economic motives. it may be appropriate for the philanthropic category to be removed from Carroll's framework when attempting to measure managerial perceptions of responsibility. Each of these will be more fully discussed in the presentation of the new model. the concerns raised by other researchers suggest that its use as a distinct component of CSR might be re-examined." It may be that this definition fails to capture certain economic activities. and ethical domains will now be expounded upon. Carroll's category of legal responsibility is defined as obeying or complying with the law (1979. . often referred to as "strategic giving" or "strategic philanthropy" (Yankee 1996: 9-10). 1993: 33). (ii) avoidance of civil litigation: and (iii) anticipation of the law. Such a cursory discussion limits the theoretical foundation that is necessary to utilize the model for certain kinds of empirical study and for teaching purposes. corporate community involvement or corporate giving to charitable organizations can help sustain the bottom line for business in the long-term. Although many researchers have found support for a philanthropic component.

. and utilitarianism" (1991: 40-42). the economic domain captures those activities which are intended to have either a direct or indirect positive economic impact on the corporation in question. Economic Domain For the purposes of the three-domain model. or in keeping with the respect or protection of stakeholders' moral rights. The ethical domain of CSR includes those activities that are based on their adherence to a set of ethical or moral standards or principles. reflecting the possible differing motivations for philanthropic activities. They are responsibilities which "embody those standards. he does not tlesh them out as broadly or as completely as they need to be articulated. The Three-Domain Model of CSR The three-domain model of CSR is composed of the three responsibility areas: economic. legal.e. rights. in our discussion." Superimposed on such ethical expectations are the implied levels of ethical performance suggested by consideration "of the great ethical principles of. and ethical.. Figure 2 presents the three-domain model of CSR. economic. By using a Venn diagram. a brief treatment of its limitations will be presented. Further. In general. these domain categories are defined in a manner consistent with Carroll's four-part model. legal.508 BUSINESS ETHICS QUARTERLY Ethical domain. Any activity that is pursued with improving profits and/or share value in mind is deemed to be economically motivated. the model initially suggests that none of the three CSR domains (i. Examples of direct economic activities include actions intended to increase sales or avoid litigation. shareholders. just. Following a discussion of the model's components. He defines the ethical domain of CSR as any activities or practices that are expected or prohibited by society members although not codified into law. In this sense. though Carroll appropriately identifies the legal and ethical categories of CSR. they are not completely discussed. and the community regard as fair. or ethical) is prima facie more important or significant relative to the others.. employees. norms or expectations that reflect a concern for what consumers. Carroll's definition of the ethical domain is not broadly developed (1991: 41). The positive impact is based on two distinct but related criteria (Poitras 1994): (i) the maximization of profits and/or (ii) the maximization of share value. the domains are developed more completely both in terms of what each means or implies and in terms of the overlapping categories that are identified when the three domains are depicted in a Venn diagram format. Examples of possible indirect economic activities include activities that are designed to improve employee morale or the company's public image. justice. with the exception that the philanthropic category is subsumed under the ethical and/or economic domains. Though Carroll names the various ethical postures.. In short. it is similar to the Carroll formulation of this component.

The first legal category. A corporation's actions would fall outside of the economic domain if (i) they are not intended to maximize profit (or minimize loss) when a more profitable alternative exists. (2) avoidance of civil litigation. In terms of the outcome or results. or (ii) they are engaged in without any real consideration of the possible economic consequences to the firm. if the activity produces a decline in profits or share value. and local jurisdictions. and (3) anticipation of the law. one is passively . . Legal Domain \ The legal category of CSR pertains to the business firm's responsiveness to legal expectations mandated and expected by society in the form of federal.CORPORATE SOCIAL RESPONSIBILITY 509 Figure 2: The Three-Domain Model of Corporate Social Responsihility (vri) Economic/ Legal/Ethical (i) Purely Economic \ (v) Economic/ / \ Legal / (ii) Purely Legal It is to be expected that the vast majority of corporate activities will be economic in nature. legality may be viewed in terms of three general categories: (1) compliance. can be further sub-divided into three types: passive. However. compliance. or through legal principles as developed in case law. if the speed limit is fifty-five miles per hour and one drives at or below fifty-five miles per hour because one believes it is safer to do so and not because of the speed limit. state. restrictive. but may also merely represent a flawed business decision (and the action would still be considered to fall within the economic domain). and opportunistic. The first type of compliance is of a passive or accidental nature—the company is doing what it wants and just happens to be complying with the law. this may be an indication of a non-economic motive. there may be some activities that would not be included. For example. In this context.

" "We wanted to pre-empt the need for legislation. In such cases one typically finds that the corporation is abiding by the letter of the law but not the spirit of the law. due to its unintentional nature. If one is in a hurry and would like to drive sixty-five miles per hour but one does not do so because of the fifty-five miles per hour speed limit. or modifying otherwise intended behavior in a restrictive fashion. First. we did happen to comply with the taw. Although a company may want to pollute at higher levels or sell goods with fewer safety warnings. The second type of compliance. restrictively. the company is in a passive compliance mode." Avoidance ot Civil Litigation "We did il because we might get sued otherwise. The payment of taxes. a corporation may actively seek out and take advantage of loopholes in the legislation to be able to engage in certain activities. one is restrictively or intentionally complying with the law." . therefore. passive compliance by the corporation. constraining. There are two general modes of opportunistic compliance. If there is a safety standard for a certain product that a company would have adhered to even if the legal requirement did not exist. occurs when a corporation is legally compelled to do something that it would not otherwise want to do. a corporation may choose to operate in a particular jurisdiction because of its weaker legal standards." Restrictive Compliance "We wanted to do . leading to restrictive compliance. would place it outside of the legal domain. the corporation would fall within the legal domain even if it passively or accidentally complied with the law." "We did it in order to comply with the law." Opportunistic Compliance "Well.510 BUSINESS ETHICS QUARTERLY complying with the law. the corporation has based its decision on Tahle I: Examples of Legal Motives and Possihle Responses Type of Legal Motive Typical Corporate/Managerial Response Passive Compliance (Outside Legal Domain) "Well. the law may prohibit it from doing so. referred to as restrictive compliance. In such a case. The adjective restrictive is used to reflect the idea that the legal system is limiting. The third type of compliance is that of opportunistic compliance. U outcomes were being analyzed. the law allows us to do it." "Lawsuits will be dropped." Anticipation of the Law "The law is going to be changed soon. If the motivations of the corporation are being analyzed by the newly proposed model. Second. This would be the case despite such motives being potentially labeled as legal under Carroll's Pyramid Model." "We operate in that jurisdiction because of the less stringent legal standards.something else but the law prevented us. or duties is often done reluctantly and. tariffs. looking back on it.

Companies that act in ways despite being aware that they will most likely be sued as a result (e.CORPORATE SOCIAL RESPONSIBILITY 511 the legal system. (ii) an awareness of actual or potential civil negligence. tnodify. and corporations may wish to engage in activities that will result in immediate compliance upon the legislation's eventual enactment. Based on this general definition. and is still technically complying with the law. or (iii) merely passive compliance with the law. corporations may.g. or slow down the pace of new legislation being enacted. The manner by which Carroll defines the standard of conventions as noted above appears . or consumer-protection legislation are opportunistically complying with the law. The decision has been based in this case on a consideration of the legal system.. If laws are anticipated. voluntarily recall products. other legal dimensions as well. for example. the three-domain model both broadens and refines Carroll's concept of the ethical domain by including only three general ethical standards: (a) conventional. however. In response to such fears. The decision to test drive one's new sports car on a highway because of its higher speed limit entails opportunistically complying with the law. employee-welfare. Changes to legislation in other jurisdictions often serve as an indication of forthcoming similar legislation in one's own jurisdiction. or cease non-environmentally friendly activities. Activities would fall outside of the legal domain when they take place despite (i) an awareness of non-compliance with the law. companies may engage in voluntary activities to help prevent. Table 1 indicates examples of the various types of legal motives and the typical responses one might hear from a corporation. This domain includes responsiveness to both domestic and global ethical imperatives. despite being in compliance with laws and regulations. The third legal category consists of the anticipation of changes to legislation. There are. (b) consequentialist. (a) Conventional standard: The standard of conventions can be explained by the moral philosophy known as ethical relativism (Pojman 1995: 31). for negligent activity) would fall outside of the legal domain. disengage in the manufacture of dangerous products. Corporations which decide to operate in developing nations because of less stringent environmental. Carroll's treatment of the legal domain appears to embrace these types of legal motives although he does not distinguish between or elaborate upon them. Often these companies engage in a legal defensive strategy whereby they attempt to settle all lawsuits. Ethical Domain The ethical domain of the three-domain model refers to the ethical responsibilities of business as expected by the general population and relevant stakeholders. relates to corporate activities that are motivated by the desire to avoid possible current or future civil litigation for negligent conduct. avoidance. and (c) deontological. The legal process is often slow in nature. and are thus acting based on a consideration of the legal system. The second general legal category.

and Schwartz 2001: 26). Frederick. an action is considered ethical according to consequentialism when it promotes the good of society. Although there are several types of consequentialism. competitors. Society is defined as embodying the corporation's stakeholders. and the local community. Justice can be of several different types. the standard of conventions will be defined as those standards or norms which have been accepted by the organization. In this respect. reference should be made to formal codes of conduct or ethics (e.." actions must still comply with a set of "minimum ethical standards" (Donaldson 1996: 6-7). industrial. when the action is intended to produce the greatest net benefit (or lowest net cost) to society when compared to all of the other alternatives (Velasquez 2002: 75). the industry.. This category would embrace two of Carroll's ethical principles. or society as necessary for the proper functioning of business. As a result. the conventional standard is relevant for the purposes of the ethical domain with respect to only those formal codes of conduct or ethics that remain grounded in (or at least do not directly conflict with) either or both of the ethical standards discussed below (i. suppliers. Freeman and Gilbert 1988. Personal standards are rejected as representing an ethical principle that is too relativistic and arbitrary to stand as an ethical standard (De George 1986. consumers. To minimize this limitation.e. distributive (whether benefits and burdens have . different stakeholder groups). organizational. For the purposes of the new model. is defined as embodying those activities which reflect a consideration of one's duty or obligation (De George 1999: 80).512 BUSINESS ETHICS QUARTERLY to limit it to a concern for justice or moral rights.e. Many objections and concerns have been raised by philosophers to the use of relativism in providing a moral justification to the actions of an individual or organization. or more specifically.g. professional. Societal norms can vary depending on one's reference point (i. the form that is relevant for the purposes of the ethical domain suggests that "the morally right thing to do is to promote the good of persons" (Hoffman. or international) to establish whether a company is acting ethically according to the conventional standard. including shareholders. consequentialism includes both egoism (promoting the good of an individual) and utilitarianism (promoting the good of society). As a result.. moral rights and ju. This approach is similar to those who suggest that although "context matters when deciding what is right and what is wrong. only utilitarianism is considered relevant for the purposes of the ethical domain under the consequentialist standard. Although egoism can be used as a moral justification for the economic domain. Pojman 1995). the profession. employees. (b) Consequentialist standard: The consequentialist standard (sometimes referred to as "teleological") focuses on ends or consequences. in addition to general citizens. as opposed to focusing on consequences. consequentialist or deontological). Rights are defined as an individual's "entitlement to something" (De George 1986: 79) and can be of a positive or negative nature (Feinberg 1973: 59-61).stice. and to enhance the standard's practical application. (c) Deontological standard: The deontological standard.

Many of the most highly criticized corporate activities .e. and ethical domains of responsibility in a Venn diagram which highlights the overlapping nature of the domains and the resultant creation of seven categories in which CSR may be conceptualized.. legal. and illustrated.e. but other pure and overlapping segments of the model create situations which also must be explored and illustrated because they represent situations decision makers may face in the business world. or retributive (Velasquez 1992: 90). i) Purely Economic Activities which are purely economic in nature must have a direct or indirect economic benefit. i. The ideal overlap resides at the center of the model where economic. and be considered amoral or unethical (other than based on egoism. For purposes of better understanding the model and for illustration.e.. Freeman and Gilbert 1988: 72). Overlapping Domains A major feature of the three-domain model is the depiction of economic. Kant's categorical imperative (Kant 1988). analyzed. reliability.sed to more general discussions of CSR. De George 1999: 80). the corporation's best interests).. be illegal (criminally or civilly) or passively comply with the law.e. the threedomain model utilizes the category of deontological principles because it has the potential to more specifically capture a broader range of potential ethical justifications that have been suggested in the literature as duty-based in nature. honesty.e. it is helpful to suggest examples that may very well fit and illustrate the tensions inherent in the various model segments.e.CORPORATE SOCIAL RESPONSIBILITY 513 been distributed equitably). In spite of this. several corporate examples entailing business ethics will be described and categorized as best falling within each of these seven CSR categories.. Examples include: religious doctrine (see Herman 1997. compensatory.e. with an unawareness or indifference to the morality of the action). Each of the seven segments will be described and illustrated. Ross's prima facie obligations (Ross 1930).. caring (i. The three-domain model is especially useful for analyses that focus on the forces that come into play in ethical decision making as oppo.. are unethical). avoid unnecessary harm). and ethical responsibilities are simultaneously fulfilled... accountability). Activities would fall outside of the ethical domain when they (i) are amoral in nature (i.e. assist the community. Instead of only relying on the principles of moral rights and justice. are only supported by egoism) (De George 1986: 45. loyalty). or (iii) are only intended to produce a net benefit for the corporation and not for the affected stakeholders (i. legal. protect the environment) (Josephson 1997). integrity. It should be kept in mind that it is extremely difficult to identify examples that ideally and perfectly illustrate each theoretical segment of the model. (ii) take place despite an awareness that the action conflicts with certain moral principles (i. and citizenship (i. or more specific core values such as trustworthiness (i. responsibility (i. where philanthropy might assume a more prominent role.

Chisso. but are acting unethically for economic motives. a Japanese industrial corporation. Other companies falling within this domain by intentionally breaking the law include General Electric. Firestone. The employee died of cyanide toxicity despite the company having been previously warned of its gross violations of worker safety standards (Reidenbach and Robin 1991: 276)." irrespective of the obligations stipulated in its own code of ethics (Byrne 1996: 10). This category could relate to what Reidenbach and Robin (1991: 275) call the "amoral" corporation. a company involved in the extraction of silver from old x-ray film. For example. which made secret payments to Japanese government officials from 1972-1975 in order to obtain business (Velasquez 1992: 207-209).514 BUSINESS ETHICS QUARTERLY fall into this category. For example. despite knowledge that the use of the product was increasing infant mortality. failed to take legally required steps which would have prevented the death of an employee in the early 1980s. Nestle was passively complying with the law and appeared to act based purely on economic motives (Velasquez 1992: 304). appears to fall within the purely economic domain based on tire blowouts and rollovers involving Firestone tires placed on Ford Explorers (Naughton and Hosenball 2000). The Ford Motor Company continued to manufacture its Pinto model car during the 1970s despite knowledge of its dangerous defect and knowing that it would be sued as a result (Velasquez 1992: 110-114). Film Recovery Systems. and Lockheed Aircraft. in knowingly producing and marketing a dangerous and addictive product without providing full disclosure to smokers. Other corporations falling within this category are passively complying with the law. One could well argue that the recently revealed actions and decisions of Enron—such as deceiving its stakeholders by shifting debt from its balance sheet—and Arthur Andersen—ordering the shredding of documents—illustrate business decision making which took only the economic domain of responsibility into consideration (Financial Times 2002). More recently. or what Carroll terms "amoral management" (Carroll 1987: 9). meaning a corporation unconcerned about the law or ethics. which engaged in illegal price fixing during the 1950s (Velasquez 1992: 199-206). Tobacco companies may have fallen within this domain for decades. Another corporate example might include Dow Corning. Nestle continued selling infant formula in the third world. but remaining secure in the knowledge that its emission levels complied with Japanese government guidelines (Donaldson 1982: 1-2). . which allegedly for economic gain "failed to fully apprise women of the known risks of breast implants. The Johns Manville Corporation appeared to be operating in this category when it "legally" allowed employees to continue working despite the company's knowledge of the health hazards of asbestos (Silverstein 1987). discharged mercury into the ocean during the 1970s knowing it posed a danger to local residents. as well as Ford.

" and in this respect he appears to have opportunistically taken advantage of the law (although the service was later declared to be legally problematic). deontological. few corporate activities currently fall into this category. The primary reason is that many activities that are considered ethical can somehow be linked to long term.. yet not intended to produce revenue and undertaken despite the ethical concerns raised. The activities of Napster. Shawn Fanning. Companies that hesitantly place warnings on their products (e. In addition. A response that one of the reasons for the act was "because it's the law" might be enough to support a degree of consideration for the legal system. however. I iii) Purely Ethical Any purely ethical activity that has no direct or indirect economic or legal implications would fall into this theoretical category. may fall within this domain. Other than corporate philanthropic activities that are not based on economic interests. in that its actions were legal. most activities which are legally required also possess an economic incentive (Posner 1986). which does not operate on Sundays. or abide by holiday shopping legislation despite financial loss. The activity must take place because of the legal system and not in spite of it. Fanning appeared to be acting despite an awareness of the ethical concerns. and can be considered purely ethical (Zigarelli. and thus the initial actions of Napster fall outside of the economic domain. at least in its early stages. Very few activities can be considered purely legal as most activities that are considered legal are also considered ethical. Restaurant chain Chick-fil-A. despite his personal opposition to the war. Although debatable. 3M's decision to retire its pollution credits despite economic loss might be viewed as a purely ethical activity (Carroll 1993: 343). is abiding by a religious deontological principle while forgoing additional revenue. in that the service was providing its users with the opportunity to infringe copyright (a violation of moral rights) held by musicians and music companies (Velasquez 2002: 61-63).g. Reidenbach and Robin 1991).g. the act of immediately recalling millions of bottles of Tylenol in 1982 by Johnson & Johnson . indirect economic benefits. When Sir Cadbury decided to honour a contract to supply English soldiers in the Boer War with chocolates at cost (indicating a passive or neutral economic motive). Such activities are performed because they are considered ethical based on at least one moral principle (e. The program was given away for free and users were not charged anything. A number of corporate examples falling within the purely ethical domain may be suggested. could conceivably fall into this category.. conventions. Fanning argued that Napster "was not doing anything illegal. he was making a purely ethical decision (Cadbury 1987. established a website allowing users to share music files. tobacco manufacturers). consequential) despite their lack of positive economic impact.CORPORATE SOCIAL RESPONSIBILITY 515 ii) Purely Legal Corporate actions that are not considered ethical and have no direct or indirect economic benefit fall into this category. For example. The founder. 2000).

appears to place these companies within this category (Kaltenheuser 1995: 21). despite no legal obligation to do so. consequentialist. Virtually all activities in this category will involve passive compliance with the law because almost all illegal activities would be considered unethical. despite facing significant economic loss. J. Many "social marketing" activities fall within this domain. improving morale and productivity." To be considered ethical. "good ethics is good business. The CEO of Maiden Mills appeared to be acting on the basis of both ethical (i. Merck and Co. There was no doubt that our customers were . etc. the "social" or "environmental" mutual fund industry (Ellmen 1996. could be considered ethical while providing indirect economic benefits.) (Teal 1996). retaining quality employees. Following a severe fire destroying several of its factory buildings. Corporations in the environmental sector (Smith 1990).516 BUSINESS ETHICS QUARTERLY upon being informed of several deaths. can be considered directly economic while simultaneously ethical. Corporations which give to charity for both economic and ethical reasons (Carroll 1993: 382) would fall within this category. At the same time. textile manufacturer Maiden Mills remained in Massachusetts and continued paying its employees their wages and health benefits until the factories were rebuilt. but is ethical and economic simultaneously.. For example. or involved in the sale of "green" products. Heinz. In the final analysis. The decision by StarKist. such as The Body Shop (Shearer 1990).. appears to have been based on ethical motives alone due to its corporate credo that placed the safety of the users of its products before stockholder interests (Davis and Frederick 1984: 549-560.g. engaged in an ethical act during the 1980s by developing and distributing for free a pill curing millions of people living in developing nations of river blindness. or deontological principles. a unit of H. deontological) and indirect economic reasons (e. the former CEO describes the simultaneous ethical and economic motivations: "The motivation for giving back had always been genuine. iv) Economic/Ethical In this category the corporate activity is not based on legal considerations. or 3M's introduction of a waste-reduction program (Carroll 1993: 356). The decision by Levi Strauss and Timberland in 1993 to pull out of China in protest of human rights abuses. it is difficult to find and defend corporate practices or decisions that illustrate purely ethical motives because it is impossible to fully know all the motives that went into a decision and the resulting consequences. Lowry 1991). despite an awareness that no sales revenue would be generated (Bollier and Weiss 1991). This category would include many corporate activities motivated by the often repeated maxim.e. to use dolphin-safe nets (Rice 1990). il was proving to be an effective marketing strategy. despite the loss of potential profits. in describing Ben & Jerry's policy of giving away free ice cream. Reidenbach and Robin 1991: 280). the activity must go beyond rational egoistic concerns and be based on conventionalist.

according to India's relatively weak legal safety standards. a poisonous leak in 1984 led to the deaths of over 2. and legal in the opportunistic or restrictive compliance sense. supported the community" (Lager 1994: 126).e. in which management is preoccupied with . while also considered unethical.500 people and the injuries of 300. For example.. v) Economic/Legal Very few activities which corporations engage in are both economic and legal. Union Carbide acted opportunistically by operating a pesticide plant in Bhopal.S. restrictive compliance.CORPORATE SOCIAL RESPONSIBILITY 517 more inclined to buy our ice cream and support our business because of how we. Nicholson 1997: 292). and can sometimes lead to the saving of jobs. which they describe as a corporation in which management "actively seeks a greater balance between profits and ethics" (1991: 279).. Dow Corning has been criticized for using protective bankruptcy laws to avoid massive litigation due to its breast implants (Reisch 1994). in which corporate behavior is "in response to market forces or legal constraints. Companies operating in China such as Chrysler Corporation are being asked to obey laws that often deny basic freedoms to Chinese citizens. Although such companies may prefer not to obey such laws.. India. An example of restrictive legal compliance would be a company abiding by a country's boycott for economic gain such as Pepsi's refusal to sell its product to Israel in order to maintain its sales in Arab countries (Reingold and Lansing 1994). although the use of bankruptcy laws is not inherently unethical. they do so because of their desire to continue doing business in the country (Freeman and Gilbert 1988: 37. By doing so these companies are opportunistically taking advantage of the law. in turn. For example. according to much more stringent standards. despite operating a similar plant in the U. The exception might be those companies that opportunistically comply with the law. Kaltenheuser 1995: 20-23). "eco-dumping"). "social dumping").e. Such opportunistic activities are often considered unethical. or product safety standards (Brooke 1995: B8. Other companies operate in third world countries because of lower environmental (i.000 others (Trevino and Nelson 1995:188). or anticipation of the law) would most likely be considered ethical as well. avoidance of civil litigation. worker safety (i. This domain would probably contain a high level of corporate activity and might be equated with Reidenbach and Robin's (1991) "emergent ethical" corporation. All of the above activities might be considered unethical. searching for and using legislative and administrative loopholes for economic gain. This category is similar to Sethi's (1979: 65) "social obligation" corporation. As a result. some companies might try to use such laws in an opportunistic manner that can be considered ethically inappropriate. economic. The reason is that activities which are based on a concern for the legal system (i.e. The Canadian retailing giant Eaton's was criticized for using bankruptcy protection in a manner which was not ethical (Brooks 1997: 1)." Reidenbach and Robin's (1991: 276) "legalistic" corporation.

but only within the confines of obeying the law and being sensitive to ethical standards" (1987: 10). Wal-Mart's decision to stop selling cigarettes in its Canadian stores appears to have been motivated by economic concerns (e. public relations). The pharmaceutical companies that are providing HIV/AIDS drugs at below cost (i..g. Unlike Reidenbach and Robin's approach however.e.e.S. vi) Legal/Ethical Certain corporate activities occur not because of any economic benefit. and ethical principles would fall into this category. the legal system. The decision by General Electric to finally support the cost of dredging the Hudson River of PCBs that were released by the company decades ago (at a time when it was legal to do so) might indicate a shift from the purely economic domain to the legal/ethical domain.e.. avoidance of government lawsuits). The decision by Procter & Gamble to pull its Rely tampons from the shelves due to the potential link with toxic shock syndrome may have been motivated by all three CSR domains (Reidenbach and Robin 1991: 278-279). placing it within the legal/ethical domain (Paulson.. the CEO argued that the decision was "the right thing to do") and legal motives (i. The example of Smith & Wesson adding safety features to its handguns appears to have been based on ethical motives (i. The decision may also reflect a recognition by the company that the action is morally required based on a past injustice.. the three-domain model would not consider a corporation which merely passively complied with the law to be a legalistic corporation.. or with Carroll's concept of "amoral management" (1987: 11). regardless of the additional cost that is required (Hudsonvoice 2002). This category conforms to Carroll's "moral management. but because they are both legally required and ethical. restrictive compliance) and considered ethical even if there is no long term economic benefit would fall within this category. non-economic) to African countries might also be considered to be acting ethically (CNN 2000). anticipation of changes to legislation. and ethical concerns (Heinzl 1994). 2000). government as well as civil lawsuits. The company appears to be responding due to legal pressures. vii) Economic/Legal/Ethical An activity which is motivated simultaneously by the bottom line." according to which management desires "profitability.518 BUSINESS ETHICS QUARTERLY compliance with the letter of the law. The activity of installing an anti-pollution device because it is legally required (i. At the same time their actions also appear to fall within the legal domain in that these companies are trying to avoid patent infringement legislation being enacted that would permit generic manufacturers to make the same drugs (DeYoung 2001: A13). Acfivities that are both ethical and legal often provide indirect economic benefits meaning that few corporate activities will fall into this category. from both the U.e. The decision was taken despite harsh criticism from the gun industry as well as consumers. It also conforms to Lynn Sharp Paine's "integrity strategy" (Paine .

this central segment (economic/legal/ethical) is where firms should seek to operate whenever possible. Paine's integrity strategy envisions ethics as the driving force in the organization although profits and legal obedience are obviously relevant factors.CORPORATE SOCIAL RESPONSIBILITY 519 1994). Carroll and Buchholtz argue that caution is needed in many of the overlapping segments of economics." because all three categories of responsibility are met (Carroll and Buchholtz 2003: 175). Figure 3 provides a summary of a number of corporate examples discussed above and where they would be situated within the three-domain model. or in the economic/ethical segment (as long as the company is passively complying with the law). From a normative point of view. Figure 3 The Three-Domain Mode! of Corporate Social Responsibility: Corporate Examples (ill) Purely Ethical Johnson & Johnson Merck (iv) Economic/ Ethical Body Shop Maiden Mills (vi) Legal/Ethical General Electric Smilh & Wesson (vii) Economic/Legal/ Ethical Procter & Gamble Wal-Marl (i) Purely Economic Film Recovery Systems Enron (ii) Purely Legal Napster (v) Economic/Legal Union Carbide Pepsi . but in this central segment the management recommendation is to "go for it. law. and ethics.

the model would have to be adjusted to account for them. one might argue that economic. The complications of international business confound both the ethical and legal domains in terms of which ethical and legal standards to apply. or ethical principles. In terms of being somewhat distinct. There may also be other ethical considerations which should be included in the ethical domain.e. activities such as affirmative action and insider trading have received significant debate as to their ethical nature. even if restrictive in nature. there also are limitations with the three-domain model that should be stated. It is our assumption. legal. would be seen as part of the ethical and/or economic categories in the three-domain model.. There will still be an overlap with the other domains at least to some extent. if the motivations of a multinational corporation are being evaluated. some might question whether any action can he identified as "purely economic. would still involve economic consequences (such as a loss to the corporation) and would still be supported by the ethical standard of cultural relativism. The new model is based on several major assumptions. in the best financial interests of the corporation). or deontological moral principles. the legal system. and that they are all-encompassing. For example. negative or break-even) and will still either be passively legal or illegal. however. As opposed to egoism or cultural relativism. however." "purely legal.. such as moral character (Solomon 1992). assumed to be a separate category in the Carroll model. In terms of the three-domain model being all encompassing. The following reflects some of the important concerns. In fact. The model assumes that the three domains of CSR are somewhat distinct. A "purely ethical" action will still have economic consequences (e. it is not clear whether there are corporate activities which are engaged in without reference to at least their economic impact. a "purely economic" action can still be in accordance with the law (although not intended to) and could still be supported by the ethical standard of egoism (i. A "purely legal" action. For example." or "purely ethical.g. consequentialist. For example. the action will be supported by other conventional." In other words. It is also assumed that philanthropic activities.520 BUSINESS ETHICS QUARTERLY Limitations of the Three-Domain Model Though the proposed model addresses some of the issues raised with the Carroll four-part construct. Although our model attempts to create distinctions through the establishment of the "pure" domains. that the model embraces all relevant aspects of CSR. These problems are continuously faced by business ethics academics who continue to struggle with methods to resolve the often conflicting principles (Derry and Green 1989). . many argue that "businesses have a moral obligation to respect legitimate law" (Orts and Strudler 2002: 226). If there are such activities. it should be noted that each of these three domains is only "pure" in certain respects. and ethical systems are all interwoven and inseparable. The inherently conflicting nature of the various ethical principles could result in serious difficulties in attempting to classify motives or activities as ethical.

even though several of them will be less important from a practical application point-of-view. The major reason for this is due to the presumably high correlation between activities that are both economic and legal. purely ethical. The fact that some reasonable examples can still be provided for each of the seven CSR categories. the Ford Pinto. for example. purely legal. and economic/legal) will rarely apply. the company is often operating within the legal domain by opportunistically complying with the law. Once the model is described and discussed in some detail in a classroom setting. As a conceptual model.CORPORATE SOCIAL RESPONSIBILITY 521 should the standards of the home country be considered. Instructors can provide or ask students to find articles in the general or business media which discuss a certain corporate decision or activity. or the host country in which the corporation is operating? The use of the opportunistic legal compliance category and the conventions ethical category address most of these concerns. its primary usefulness will be in the realm of pedagogy—helping others to conceptualize the components of CSR and the nuances involved in their understanding and application. it is expected that certain CSR categories (e. Other ethical principles. Procter & Gamble and the Rely tampon. The complexities of international business ethics continue to be addressed by numerous business ethicists (e. This can lead to class discussions on whether students agree with the classification and the implications for the corporation acting in its chosen manner. The model helps to classify many of the major case studies which have been presented in business ethics literature. From a research standpoint... The activity can then be classified by the student or groups of students. Implications for Teaching and Research The three-domain model should be useful both for teaching and research in the business ethics and social issues in management fields. Donaldson and Dunfee 1999). the model creates a definition and overlapping segments that may be further explored. Johnson & Johnson and Tylenol. In such instances. It is proposed that the three-domain model of CSR provides a scheme for conceptualizing the major issues in one or more of these literatures. thus limiting the conceptual or practical application of some segments of the model. students can apply the model by engaging in practical exercises. however.g. however. Following is a brief discussion of each of these areas. and the activities of Ben & Jerry's . may be violated in such cases. Johns Manville and asbestos. Donaldson 1989. and those that are both legal and ethical. Teaching Social Issues in Management and Business Ethics There is an ongoing debate as to appropriate methods for teaching business and society. Finally. and could be acting ethically based on national conventions. DeGeorge 1993. social issues in management. suggests that all of the categories should be included in the conceptual framework.g. Union Carbide and Bhopal. and business ethics. such as moral rights or utilitarianism.

Although it is not being proposed that the three-domain model provides definitive answers to the following questions. the motivations of companies or the results of their activities and practices? The model might also be used to help analyze and discuss growing trends in the business and society field including: business ethics. and stakeholder management. the model should be valuable in the process of analyzing case studies in a classroom setting. legal. Students can debate. social. the model may provide a useful construct for beginning to engage in many of the major debates. strategic philanthropy. social auditing. sustainability. and ethics? Are they ever distinct? Why should corporations be socially responsible? How does one determine social responsibility? Should philanthropy be considered a distinct social obligation of business. such that the three-domain model might provide an initial framework to better understand these new developments and their relationship to each other. law. Research Implications In addition to teaching applications and implications. In a related vein. triple bottom-line. Thus. corporate citizenship. social investment. whether it is really the case that Johnson & Johnson should fall within the purely ethical domain. such as: What is corporate social responsibility? Should it involve dimensions beyond economic. legal. the three-domain model could be used in a variety of ways with respect to empirical research. law. to some extent. and ethics (including societal impact). Each of these concepts involves. Were there not economic or legal motives as well for their actions? Has Ford shifted out of the purely economic domain following its Pinto disaster with respect to its actions involving Firestone tires? What activities of Ben & Jerry's or The Body Shop might be considered purely ethical.or cause-related marketing. the model helps the student to describe and understand what is going on and also from a normative perspective to suggest what ought to be taking place. The three-domain model assists the student in identifying and analyzing the competing forces at work in a business decision and in assessing the relative mix of economic. aspects of economics. for example.522 BUSINESS ETHICS QUARTERLY and The Body Shop. and ethical forces and motivations that are at work and ought to be at work. the model has both diagnostic and normative properties. or considered to be subsumed under ethical and/or economic responsibilities? What should be included in the ethical domain? Should companies avoid actions when they know they will be subjected to lawsuits as a result? What examples demonstrate that good business ethics is good business? Are there examples of good business ethics being bad business? What is more important. if any? The model can also be used as a measure of testing students' understanding of the different CSR domains by providing past or current examples of corporate activities and asking students to justify their classifications of the examples within the CSR framework. and ethical responsibility? What is the relationship between economics. Three future research uses of the model include: (1) the development of a research . In this context.

the meaning of the concepts to be studied was described. Then. and ethical domains. or joint venture partners.." and (3) use of the model and instrument to investigate future research questions.g. Individual employee CSR Portraits could be aggregated together to generate a CSR Portrait for a functional area or a company as a whole. this research instrument could be used primarily through survey research. graphical representations of one's CSR prioritizations) might be generated for whichever entity is being analyzed (e." Once the research instrument is developed. In this stage. That instrument has been used in many empirical studies of CSR and it is anticipated that the research instrument patterned after the three-domain model would likewise be useful in exploring a number of interesting and important research questions. however. Development of a Research Instrument.CORPORATE SOCIAL RESPONSIBILITY 523 instrument for measurement of CSR and its component domains. a CSR portrait for the tobacco industry might look very different from a CSR portrait for the toy industry. These could then be used individually to pursue research questions concerning their particular role in CSR. CSR Portraits could also be established for stakeholder groups based on the domains they believe the corporation is currently emphasizing ("actual" CSR Portrait) or would prefer the corporation to operate within ("desired" CSR Portrait). In general terms.. Figure 4 provides a possible way to depict CSR Portraits of a hypothetical toy company. The greater the emphasis placed on a given domain. "CSR Portraits" {i. For instance. their relationships with other variables. the larger the area which will be depicted in the CSR Portrait. This is a task for future research. The most logical next step in future research would be the operationalization of the variables and the creation of a valid and reliable data gathering instrument by which data regarding the model could be gathered. or collectively as an overall measurement of CSR.e. stakeholders. Once this takes place. and then aggregating them together. as presented. . subsidiary corporalions. Development of Corporate Social Responsibility (CSR) "Portraits. Two additional decisions needed in the research process include operalionalization of the variables under consideration and choice of research method to be used (Babbie 1992: 104). we can describe that it would be composed of several parts which operationalize the economic. (2) use of the model and instrument to develop CSR "portraits. Portraits could also be created for the corporation's Board of Directors. The three-domain CSR model. It is beyond the scope of this paper to present a research instrument that would enable the measurement of CSR in the three-domain model. one objective might be to establish the emphasis respondents place on each of the CSR domains (including overlapping domains). corporations). represents the conceptualization stage in the research process. it may be possible to construct an industry CSR Portrait by weighting each firm's portrait by its market share or other financial measure. This procedure would follow the pattern established by Aupperle (1984) in his research instrument designed to collect data on Carroll's four categories of CSR. individuals. legal. If CSR Portraits are obtained from several firms in a specific industry.

.) Ethical Orientation (e. Consumers" "Desired" Toy Co. Is there a difference between those corporate examples used in business ethics courses as opposed to other business sehool courses with respect to the domains? If there is a difference. Some possible research questions include: 1. legal compliance vs. Toy Industry) Investigating Future Research Questions.e.) (e.g. acting within certain CSR domains such as the economic/lcgal/cthical category) associated with firm financial performance? Does it lead or lag financial performance? (CSR performance is also referred to as CSP—corporate social performance). Is CSR performance (i. To what extent do corporate activities fall within each of the seven CSR categories? 3.. . anticipate law. Are corporate examples used in teaching business more prevalent within certain domains? 4.. Future research can be greatly facilitated following the three-domain model.g. Do corporations tend to shift from one domain to another (i.g.g. the research process will be greatly advanced as a number of different populations and samples may be studied. One issue is the creation of an instrument designed to measure CSR and its component domains. share value. profits vs. A third issue is the exploration of existing and future research questions. or should be considered.. consequences). deontological vs.. Legal Dept. avoid civil litigation vs. more important relative to each other (e.) Balanced Orientation (e.. Do students tend to shift their preference from one domain to another after taking a business ethics or social issues in management course? 7. change their emphasis) following a significant corporate scandal? 6.524 BUSINESS ETHICS QUARTERLY Figure 4 Corporate Social Responsibility "Portraits' Economic Orientation Legal Orientation (e. CEO of Acme Toy Co. Do corporate employees tend to shift their preference from one domain to another following legal compliance or ethics training? 8. 2. With the creation and testing of a research instrument.g. What aspects within each of the three domains are. conventions vs. might this have an impact on students' perceptions of the responsibilities of business? 5.e. The three-domain model of CSR might be used to further answer a number of possible research questions.. A second issue is the possible creation of CSR Portraits using data gathered via the research instrument.

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